Texas 2009 - 81st Regular

Texas Senate Bill SB769 Compare Versions

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1	1	S.B. No. 769
2	2
3	3
4	4	AN ACT
5	5	relating to methods for the recovery of system restoration costs
6	6	incurred by electric utilities following hurricanes, tropical
7	7	storms, ice or snow storms, floods, and other weather-related
8	8	events and natural disasters.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Chapter 36, Utilities Code, is amended by adding
11	11	Subchapter I to read as follows:
12	12	SUBCHAPTER I. SECURITIZATION FOR RECOVERY OF SYSTEM
13	13	RESTORATION COSTS
14	14	Sec. 36.401. SECURITIZATION FOR RECOVERY OF SYSTEM
15	15	RESTORATION COSTS; PURPOSE. (a) The purpose of this subchapter is
16	16	to enable an electric utility to obtain timely recovery of system
17	17	restoration costs and to use securitization financing to recover
18	18	these costs, because that type of debt will lower the carrying costs
19	19	associated with the recovery of these costs, relative to the costs
20	20	that would be incurred using conventional financing methods. The
21	21	proceeds of the transition bonds may be used only for the purposes
22	22	of reducing the amount of recoverable system restoration costs, as
23	23	determined by the commission in accordance with this subchapter,
24	24	including the refinancing or retirement of utility debt or equity.
25	25	(b) It is the intent of the legislature that:
26	26	(1) securitization of system restoration costs will be
27	27	accomplished using the same procedures, standards, and protections
28	28	for securitization authorized under Subchapter G, Chapter 39, as in
29	29	effect on the effective date of this section, except as provided by
30	30	this subchapter; and
31	31	(2) the commission will ensure that securitization of
32	32	system restoration costs provides greater tangible and
33	33	quantifiable benefits to ratepayers than would have been achieved
34	34	without the issuance of transition bonds.
35	35	Sec. 36.402. SYSTEM RESTORATION COSTS; STANDARDS AND
36	36	DEFINITIONS. (a) In this subchapter, "system restoration costs"
37	37	means reasonable and necessary costs, including costs expensed,
38	38	charged to self-insurance reserves, deferred, capitalized, or
39	39	otherwise financed, that are incurred by an electric utility due to
40	40	any activity or activities conducted by or on behalf of the electric
41	41	utility in connection with the restoration of service and
42	42	infrastructure associated with electric power outages affecting
43	43	customers of the electric utility as the result of any tropical
44	44	storm or hurricane, ice or snow storm, flood, or other
45	45	weather-related event or natural disaster that occurred in calendar
46	46	year 2008 or thereafter. System restoration costs include
47	47	mobilization, staging, and construction, reconstruction,
48	48	replacement, or repair of electric generation, transmission,
49	49	distribution, or general plant facilities. System restoration
50	50	costs shall include reasonable estimates of the costs of an
51	51	activity or activities conducted or expected to be conducted by or
52	52	on behalf of the electric utility in connection with the
53	53	restoration of service or infrastructure associated with electric
54	54	power outages, but such estimates shall be subject to true-up and
55	55	reconciliation after the actual costs are known.
56	56	(b) System restoration costs shall include carrying costs
57	57	at the electric utility's weighted average cost of capital as last
58	58	approved by the commission in a general rate proceeding from the
59	59	date on which the system restoration costs were incurred until the
60	60	date that transition bonds are issued or until system restoration
61	61	costs are otherwise recovered pursuant to the provisions of this
62	62	subchapter.
63	63	(c) To the extent a utility subject to this subchapter
64	64	receives insurance proceeds, governmental grants, or any other
65	65	source of funding that compensate it for system restoration costs,
66	66	those amounts shall be used to reduce the utility's system
67	67	restoration costs recoverable from customers. If the timing of a
68	68	utility's receipt of those amounts prevents their inclusion as a
69	69	reduction to the system restoration costs that are securitized, or
70	70	the commission later determines as a result of the true-up and
71	71	reconciliation provided for in Subsection (a) that the actual costs
72	72	incurred are less than estimated costs included in the
73	73	determination of system restoration costs, the commission shall
74	74	take those amounts into account in:
75	75	(1) the utility's next base rate proceeding; or
76	76	(2) any subsequent proceeding, other than a true-up
77	77	proceeding under Section 39.307, in which the commission considers
78	78	system restoration costs.
79	79	(d) If the commission determines that the insurance
80	80	proceeds, governmental grants, or other sources of funding that
81	81	compensate the electric utility for system restoration costs, or
82	82	the amount resulting from a true-up of estimated system restoration
83	83	costs are of a magnitude to justify a separate tariff rider, the
84	84	commission may establish a tariff rider to credit such amounts
85	85	against charges, other than transition charges or system
86	86	restoration charges as defined in Section 36.403, being collected
87	87	from customers.
88	88	(e) To the extent that the electric utility receives
89	89	insurance proceeds, governmental grants, or any other source of
90	90	funding that is used to reduce system restoration costs, the
91	91	commission shall impute interest on those amounts at the same cost
92	92	of capital included in the utility's system restoration costs until
93	93	the date that those amounts are used to reduce the amount of system
94	94	restoration costs that are securitized or otherwise reflected in
95	95	the rates of the utility.
96	96	Sec. 36.403. STANDARDS AND PROCEDURES GOVERNING
97	97	SECURITIZATION AND RECOVERY OF SYSTEM RESTORATION COSTS. (a) The
98	98	procedures and standards of this subchapter and the provisions of
99	99	Subchapter G, Chapter 39, govern an electric utility's application
100	100	for, and the commission's issuance of, a financing order to provide
101	101	for the securitization of system restoration costs, or to otherwise
102	102	provide for the recovery of system restoration costs.
103	103	(b) Subject to the standards, procedures, and tests
104	104	contained in this subchapter and Subchapter G, Chapter 39, the
105	105	commission shall adopt a financing order on the application of the
106	106	electric utility to recover its system restoration costs. If on its
107	107	own motion or complaint by an affected person, the commission
108	108	determines that it is likely that securitization of system
109	109	restoration costs would meet the tests contained in Section
110	110	36.401(b), the commission shall require the utility to file an
111	111	application for a financing order. On the commission's issuance of
112	112	a financing order allowing for recovery and securitization of
113	113	system restoration costs, the provisions of this subchapter and
114	114	Subchapter G, Chapter 39, continue to govern the financing order
115	115	and the rights and interests established in the order, and this
116	116	subchapter and Subchapter G, Chapter 39, continue to govern any
117	117	transition bonds issued pursuant to the financing order. To the
118	118	extent any conflict exists between the provisions of this
119	119	subchapter and Subchapter G, Chapter 39, in cases involving the
120	120	securitization of system restoration costs, the provisions of this
121	121	subchapter control.
122	122	(c) For purposes of this subchapter, "financing order," as
123	123	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
124	124	includes a financing order authorizing the securitization of system
125	125	restoration costs.
126	126	(d) For purposes of this subchapter, "qualified costs," as
127	127	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
128	128	includes 100 percent of the electric utility's system restoration
129	129	costs, net of any insurance proceeds, governmental grants, or other
130	130	source of funding that compensate the utility for system
131	131	restoration costs, received by the utility at the time it files an
132	132	application for a financing order. Qualified costs also include
133	133	the costs of issuing, supporting, and servicing transition bonds
134	134	and any costs of retiring and refunding existing debt and equity
135	135	securities of an electric utility subject to this subchapter in
136	136	connection with the issuance of transition bonds. For purposes of
137	137	this subchapter, the term qualified costs also includes:
138	138	(1) the costs to the commission of acquiring
139	139	professional services for the purpose of evaluating proposed
140	140	transactions under this subchapter; and
141	141	(2) costs associated with ancillary agreements such as
142	142	any bond insurance policy, letter of credit, reserve account,
143	143	surety bond, swap arrangement, hedging arrangement, liquidity or
144	144	credit support arrangement, or other financial arrangement entered
145	145	into in connection with the issuance or payment of transition
146	146	bonds.
147	147	(e) For purposes of this subchapter, "transition bonds," as
148	148	defined by Section 39.302 and as used in Subchapter G, Chapter 39,
149	149	includes transition bonds issued in association with the recovery
150	150	of system restoration costs. Transition bonds issued to securitize
151	151	system restoration costs may be called "system restoration bonds"
152	152	or may be called by any other name acceptable to the issuer and the
153	153	underwriters of the transition bonds.
154	154	(f) For purposes of this subchapter, "transition charges,"
155	155	as defined by Section 39.302 and as used in Subchapter G, Chapter
156	156	39, includes nonbypassable amounts to be charged for the use of
157	157	electric services, approved by the commission under a financing
158	158	order to recover system restoration costs, that shall be collected
159	159	by an electric utility, its successors, an assignee, or other
160	160	collection agents as provided for in the financing order.
161	161	Transition charges approved by the commission under a financing
162	162	order to recover system restoration costs may be called "system
163	163	restoration charges" or may be called by any other name acceptable
164	164	to the issuer and the underwriters of the transition bonds.
165	165	(g) Notwithstanding Section 39.303(c), system restoration
166	166	costs shall be functionalized and allocated to customers in the
167	167	same manner as the corresponding facilities and related expenses
168	168	are functionalized and allocated in the electric utility's current
169	169	base rates. For an electric utility operating within the Electric
170	170	Reliability Council of Texas, system restoration costs that are
171	171	properly includable in the transmission cost of service mechanism
172	172	adopted under Section 35.004 and associated deferred costs not
173	173	included under Section 35.004 shall be recovered under the method
174	174	of pricing provided for in that section and commission rules
175	175	promulgated under that section; provided, however, that an electric
176	176	utility operating under a rate freeze or other limitation on its
177	177	ability to pass through wholesale costs to its customers may defer
178	178	such costs and accrue carrying costs at its weighted average cost of
179	179	capital as last approved by the commission in a general rate
180	180	proceeding until such time as the freeze or limitation expires.
181	181	(h) The amount of any accumulated deferred federal income
182	182	taxes offset, used to determine the securitization total, may not
183	183	be considered in future rate proceedings. Any tax obligation of the
184	184	electric utility arising from its receipt of securitization bond
185	185	proceeds, or from the collection and remittance of transition
186	186	charges, shall be recovered by the electric utility through the
187	187	commission's implementation of this subchapter.
188	188	(i) Notwithstanding a rate freeze or limitations on an
189	189	electric utility's ability to change rates authorized or imposed by
190	190	any other provision of this title or by a regulatory authority, an
191	191	electric utility is entitled to recover system restoration costs
192	192	consistent with the provisions of this subchapter.
193	193	(j) If in the course of a proceeding to adopt a financing
194	194	order the commission determines that the recovery of all or any
195	195	portion of an electric utility's system restoration costs, using
196	196	securitization, is not beneficial to ratepayers of the electric
197	197	utility, under one or more of the tests applied to determine those
198	198	benefits, the commission shall nonetheless use the proceeding to
199	199	issue an order permitting the electric utility to recover the
200	200	remainder of its system restoration costs through an appropriate
201	201	customer surcharge mechanism, including carrying costs at the
202	202	electric utility's weighted average cost of capital as last
203	203	approved by the commission in a general rate proceeding, to the
204	204	extent that the electric utility has not securitized those costs. A
205	205	rate proceeding under Subchapter C or D shall not be required to
206	206	determine and implement this surcharge mechanism. On the final
207	207	implementation of rates resulting from the filing of a rate
208	208	proceeding under Subchapter C or D that provides for the recovery of
209	209	all remaining system restoration costs, a rider or surcharge
210	210	mechanism adopted under this subsection shall expire. This
211	211	subsection is limited to instances in which an electric utility has
212	212	incurred system restoration costs of $100 million or more in any
213	213	calendar year after January 1, 2008.
214	214	Sec. 36.404. NONBYPASSABLE CHARGES. The commission shall
215	215	include terms in the financing order to ensure that the imposition
216	216	and collection of transition charges associated with the recovery
217	217	of system restoration costs are nonbypassable by imposing
218	218	restrictions on bypassability of the type provided for in Chapter
219	219	39 or by alternative means of ensuring nonbypassability, as the
220	220	commission considers appropriate, consistent with the purposes of
221	221	securitization.
222	222	Sec. 36.405. DETERMINATION OF SYSTEM RESTORATION COSTS.
223	223	(a) An electric utility is entitled to recover system restoration
224	224	costs consistent with the provisions of this subchapter and is
225	225	entitled to seek recovery of amounts not recovered under this
226	226	subchapter, including system restoration costs not yet incurred at
227	227	the time an application is filed under Subsection (b), in its next
228	228	base rate proceeding or through any other proceeding authorized by
229	229	Subchapter C or D.
230	230	(b) An electric utility may file an application with the
231	231	commission seeking a determination of the amount of system
232	232	restoration costs eligible for recovery and securitization. The
233	233	commission may by rule prescribe the form of the application and the
234	234	information reasonably needed to support the application;
235	235	provided, however, that if such a rule is not in effect, the
236	236	electric utility shall not be precluded from filing its application
237	237	and such application cannot be rejected as being incomplete.
238	238	(c) The commission shall issue an order determining the
239	239	amount of system restoration costs eligible for recovery and
240	240	securitization not later than the 150th day after the date an
241	241	electric utility files its application. The 150-day period begins
242	242	on the date the electric utility files the application, even if the
243	243	filing occurs before the effective date of this section.
244	244	(d) An electric utility may file an application for a
245	245	financing order prior to the expiration of the 150-day period
246	246	provided for in Subsection (c). The commission shall issue a
247	247	financing order not later than 90 days after the utility files its
248	248	request for a financing order; provided, however, that the
249	249	commission need not issue the financing order until it has
250	250	determined the amount of system restoration costs eligible for
251	251	recovery and securitization.
252	252	(e) To the extent the commission has made a determination of
253	253	the eligible system restoration costs of an electric utility before
254	254	the effective date of this section, that determination may provide
255	255	the basis for the utility's application for a financing order
256	256	pursuant to this subchapter and Subchapter G, Chapter 39. A
257	257	previous commission determination does not preclude the utility
258	258	from requesting recovery of additional system restoration costs
259	259	eligible for recovery under this subchapter, but not previously
260	260	authorized by the commission.
261	261	(f) A rate proceeding under Subchapter C or D shall not be
262	262	required to determine the amount of recoverable system restoration
263	263	costs, as provided by this section, or for the issuance of a
264	264	financing order.
265	265	(g) A commission order under this subchapter is not subject
266	266	to rehearing. A commission order may be reviewed by appeal only to
267	267	a Travis County district court by a party to the proceeding filed
268	268	within 15 days after the order is signed by the commission. The
269	269	judgment of the district court may be reviewed only by direct appeal
270	270	to the Supreme Court of Texas filed within 15 days after entry of
271	271	judgment. All appeals shall be heard and determined by the district
272	272	court and the Supreme Court of Texas as expeditiously as possible
273	273	with lawful precedence over other matters. Review on appeal shall
274	274	be based solely on the record before the commission and briefs to
275	275	the court and shall be limited to whether the order conforms to the
276	276	constitution and laws of this state and the United States and is
277	277	within the authority of the commission under this chapter.
278	278	Sec. 36.406. SEVERABILITY. Effective on the date the first
279	279	utility transition bonds associated with system restoration costs
280	280	are issued under this subchapter, if any provision in this title or
281	281	portion of this title is held to be invalid or is invalidated,
282	282	superseded, replaced, repealed, or expires for any reason, that
283	283	occurrence does not affect the validity or continuation of this
284	284	subchapter, Subchapter G, Chapter 39, as it applies to this
285	285	subchapter, or any part of those provisions, or any other provision
286	286	of this title that is relevant to the issuance, administration,
287	287	payment, retirement, or refunding of transition bonds or to any
288	288	actions of the electric utility, its successors, an assignee, a
289	289	collection agent, or a financing party, and those provisions shall
290	290	remain in full force and effect.
291	291	SECTION 2. This Act takes effect immediately if it receives
292	292	a vote of two-thirds of all the members elected to each house, as
293	293	provided by Section 39, Article III, Texas Constitution. If this
294	294	Act does not receive the vote necessary for immediate effect, this
295	295	Act takes effect September 1, 2009.
296	296	______________________________ ______________________________
297	297	President of the Senate Speaker of the House
298	298	I hereby certify that S.B. No. 769 passed the Senate on March
299	299	25, 2009, by the following vote: Yeas 31, Nays 0.
300	300	______________________________
301	301	Secretary of the Senate
302	302	I hereby certify that S.B. No. 769 passed the House on April
303	303	7, 2009, by the following vote: Yeas 146, Nays 0, one present not
304	304	voting.
305	305	______________________________
306	306	Chief Clerk of the House
307	307	Approved:
308	308	______________________________
309	309	Date
310	310	______________________________
311	311	Governor